TMI Blog1980 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to the assessee, the sum of Rs. 3,500 was, in fact, never in its hands during the intervening period. The ITO found the explanation to be untrue because on three occasions during the period between December 26, 1967, and October 2, 1968, the cash balance had actually fallen to the extent of Rs. 1,300 below the amount which should have been in the hands of the assessee, if the totalling mistake had not occurred. In other words, it was found that the assessee was, in fact, possessed of excess cash during the aforesaid period which he had drawn upon on three different occasions to the extent of Rs. 1,300. When confronted with this evidence, the assessee tendered a further explanation that it had borrowed a temporary loan from one Hathilal Amarchand which was not recorded in the books and that the shortfall of Rs. 1,300 on the three relevant days was met from the amount advanced by the said Hathilal. The ITO thereupon examined Hathilal and recorded his statement in regard to the alleged loan. Hathilal denied having advanced any loan to the assessee. An opportunity was afforded to the assessee and its representative to cross-examine Hathilal but it was not availed of. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olly untrue. If this was merely a case of an arithmetical error, the cash balance on the 3 dates would not have gone below Rs. 3,500 as detected by the ITO. Actually, the cash balance during the intervening period had gone down to less than Rs. 3,500 by about Rs. 1,300 as found by the ITO and the IAC and if the assessee's story was true, the cash balance should have always exceeded Rs. 3,500 all along during the intervening period. " The assessee also placed for the consideration of the Tribunal the alternative case of having borrowed a loan from Hathilal on the days on which the cash balance had gone down below Rs. 3,500. This alternative submission was also rejected by the Tribunal in the following words: " Even at the time of the hearing of this appeal, the assessee's representative is unable to furnish the said dates on which such hand-loans were taken from Shri Hathilal Amarchand, the amounts of hand-loan taken and the dates on which the hand-loans were returned. In fact, the said Shri Hathilal Amarchand has flatly denied in the presence of the assessee having given any hand-loans at any time and the assessee thought it prudent not to cross-examine Shri Hathilal Amarchand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would show that both the IAC and the Tribunal have invoked in aid the Explanation to s. 271(1)(c) in addition to the main provision of s. 271(1)(c). They have found that the conditions laid down in the Explanation are also satisfied. Since we are in agreement with the said view, we propose to deal with the question referred for our opinion only on the basis of the applicability of the Explanation without entering into the consideration of the further question whether the requirements of s. 271(1)(c) are independently satisfied. The Explanation to s. 271(1)(c) read as follows at the material time: " Explanation.-Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of bringing the case within section 271(1)(c) again on the revenue, as it would be in the absence of the Explanation, the assessee has to show and this burden is upon him that his failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part ...... It is a burden akin to that in a civil case where the determination is made on preponderance of probabilities. It is also not necessary that any positive material should be produced by the assessee in order to discharge this burden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record in the penalty proceedings, irrespective of whether it is produced by him or by the revenue. The only, question to which the income-tax authority has to address itself is, whether on the material on record in the penalty proceedings, can it be said on a preponderance of probabilities that the failure to return the total assessed income has not arisen on account of any fraud or any gross or wilful neglect on the part of the assessee. If the answer to the question is in the affirmative, the legal fiction enacted in the Explanation cannot arise and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid conclusion has been correctly reached by the Tribunal on a balanced consideration of the entire evidence on record and by approaching the question from the correct legal angle. The difference between the returned income and the assessed total income has arisen in the instant case because it was found, during the course of the assessment proceedings, that the amount of Rs. 3,500, which was introduced in and subsequently withdrawn from the account books of the assessee, constituted the undisclosed income of the assessee earned during the relevant accounting year. In the penalty proceedings, in the context of the provisions of the Explanation, the burden was on the assessee to show, on a preponderance of probabilities, that no fraud, inter alia, was involved in his failure to return the correct income. The assessee fell back upon the same explanations which it had offered during the course of the assessment proceedings in order to discharge the said burden. These explanations are found to be wholly untrue. No other explanation such as, for example, that the amount was drawn from a fund which was constituted by the secret profits or undisclosed income of the assessee earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aud or gross or wilful neglect on the part of the assessee and, if that be so, it must follow by necessary implication that the failure to return the total assessed income was not on account of any fraud or gross or wilful neglect on the part of the assessee..." In Vinaychand's case [1979] 120 ITR 752 (Guj) the ITO treated an amount of Rs. 88,455 as the income of the assessee by invoking in support of his conclusion the provisions of s. 69A. In appeal, the assessee contended that the amount of Rs. 88,455 should not be treated as his income but that the peak amount of Rs. 45,000 should be treated as his money. The AAC did not accept the contention regarding Rs. 45,000 being the peak amount but he came to the conclusion that the peak amount was Rs. 60,000. The assessee conceded that the amount in question which was invested in the purchase of the demand drafts belonged to the assessee and that it may be assessed in his hands. Thereupon, the AAC treated Rs. 60,000 as the income of the assessee for the previous year relevant to the assessment year under consideration. In the penalty proceedings, the Explanation to s. 271(1)(c) was invoked in aid and it was contended that it was for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome and that, therefore, there was a denial of reasonable opportunity of being heard before the imposition of the penalty inasmuch as the penalty proceedings were commenced on a particular footing and the final conclusion was based on different footing altogether. The second contention was that the show-cause notice did not give any indication that it was intended to resort to the Explanation and that no such indication was given even during the course of the penalty proceedings and that, therefore, there was denial of reasonable opportunity. Both these contentions, in our opinion, deserve to be rejected. So far as the first contention is concerned, on a fair reading of the order of the IAC in all its material farts, we are unable to agree that he reached the ultimate conclusion on the question of imposition of penalty on the basis that the assessee had furnished inaccurate particulars of income. It is true that the IAC has referred to " inaccuracy " and to " inaccurate particulars of income " at some places. However, it is manifest, on a close reading of the order as a whole, that the penalty was imposed for concealment of income. That is also the view taken by the Tribunal as r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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